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Supreme Court Demonetisation Case Verdict Highlights: SC upholds centre’s decision on demonetisation by 4:1 majority

Supreme Court Order on Demonetisation Highlights: Justice BV Nagarathna in her dissenting view held that though demonetisation was well-intentioned and well thought of, it has to be declared unlawful on legal grounds (and not on the basis of objects).

By: Express Web Desk
New Delhi | Updated: January 5, 2023 07:17 IST
The centre’s decision six years ago to demonetise currency notes of Rs 500 and Rs 1,000 passed the Supreme Court’s test Monday in a majority 4-1 verdict. (File Photo)

Demonetisation Case Order Highlights: A Constitution Bench of the Supreme Court Monday upheld by a 4:1 majority the decision taken by the central government six years ago in 2016 to demonetise currency notes of Rs 500 and Rs 1,000 denominations. The majority, comprising Justices S Abdul Nazeer, B R Gavai, A S Bopanna, V Ramasubramanian, held that the Centre’s notification dated November 8, 2016, was valid and satisfied the test of proportionality. Justice BV Nagarathna in her dissenting view held that though demonetisation was well-intentioned and well thought of, it has to be declared unlawful on legal grounds (and not on the basis of objects).

Following the Supreme Court’s verdict, the Bharatiya Janata Party launched a scathing attack on the Congress and its former president Rahul Gandhi. Former Union Minister and senior BJP leader Ravi Shankar Prasad asked if the Wayanad MP would apologise to the nation now for his ‘campaign against the demonetisation scheme’. Hitting back, the Congress and the Nationalist Congress Party (NCP) said the BJP government at the Centre cannot absolve itself of blame for the distress the people of the country suffered due to the decision to scrap high-value currency notes.

On December 28, 2022, The Indian Express had reported that both the central government and the RBI omitted from their respective affidavits submitted to the Supreme Court that the RBI’s recommendation for the noteban — a procedural requirement — came after the central bank critiqued many of the government’s justifications. While the government, in its affidavit, said that it was a “well-considered” decision and the consultation process with the RBI had begun in February 2016, the central bank, too, said that due process was followed and it was the one that recommended the demonetisation.

Live Blog

Supreme Court Demonetisation Case Verdict Highlights: The SC has heard a batch of 58 petitions challenging the demonetisation exercise announced by the Centre on November 8, 2016. Follow this space for the latest news updates.

14:35 (IST)03 Jan 2023
Explained | Supreme Court underlines in demonetisation verdict: Govt, RBI not in ‘isolated boxes’

In upholding the Centre’s 2016 decision to demonetise currency notes of Rs 500 and Rs 1,000, Supreme Court gives a wide interpretation to the law on the decision-making process and extends the benefit of doubt to the government on the key events leading up to the decision.

The majority ruling by four judges accepts all contentions of the Centre: from who can initiate the proposal for demonetisation, whether the decision was needed to be done in haste and secrecy to the court’s adjudication being essentially an “academic” exercise.

The majority view also places reliance on the “record” submitted by the government after the hearing was complete and the Court reserved its verdict to hold that the RBI was sufficiently consulted on the issue. It is from this record, which the petitioners were not given an opportunity to reply to, that the Court holds that the Centre and RBI discussed the demonetisation issue for over six months. (Read More)

14:30 (IST)03 Jan 2023
Explained | Two views on six issues: What the Supreme Court’s demonetisation verdict says

In the Supreme Court’s majority opinion upholding the government’s demonetisation order of November 8, 2016, Justice B R Gavai — writing for himself and Justices S Abdul Nazeer, A S Bopanna, and V Ramasubramanian — reframed the questions referred to the Constitution Bench into six issues. In her dissenting judgment, Justice B V Nagarathna disagreed with the reasoning and conclusions in the majority opinion.

1. Whether the power available to the Central Government under sub-section (2) of Section 26 of the RBI Act can be restricted to mean that it can be exercised only for “one” or “some” series of bank notes and not “all” series in view of the word “any” appearing before the word “series” in the said sub-section, specifically so, when on earlier two occasions, the demonetisation exercise was done through the plenary legislation? (Read More)

14:12 (IST)03 Jan 2023
Express View on demonetisation: Take note in noteban

Six years after Prime Minister Narendra Modi announced the demonetisation of Rs 500 and Rs 1,000 notes, a five-judge constitutional bench of the Supreme Court has upheld the controversial decision. The 4:1 verdict on Monday rejected the petitions challenging demonetisation, and upheld its legality, with the majority concluding that there was no flaw in the decision-making process. However, the dissenting judgment, authored by Justice B V Nagarathna, has not only called the entire exercise not in accordance with the law but has also raised crucial questions over the RBI’s institutional independence. The central bank would do well to heed those questions.

Justice Nagarathna notes that the proposal for demonetisation “originated” from the central government and that the recommendation was “obtained” from the RBI in the form of an opinion. She points out that the records contained phrases such as — “as desired” by the central government, and that the government had “recommended” — which showed that there was “no independent application of mind” by the RBI. (Read More)

14:09 (IST)03 Jan 2023
Demonetisation verdict: SC ruled on process, says Opp; Congress seeks apology by PM

As the Supreme Court upheld, by a 4:1 majority, the Centre’s demonetisation decision of 2016, opposition parties on Saturday said the majority judgment has neither endorsed the wisdom of the decision nor commented on its impact and outcomes.

“To say that demonetisation has been upheld by Supreme Court is totally misleading and wrong,” AICC general secretary in charge of communication, Jairam Ramesh, said.

The party also criticised the BJP, which demanded an apology from Rahul Gandhi in the wake of the SC verdict. It said Prime Minister Narendra Modi should, in fact, apologise, as his “Tughlaqi decision” had devastated small- and medium-scale businesses, destroyed the informal sector, and finished off livelihoods of lakhs of families. (Read More)

14:07 (IST)03 Jan 2023
Govt should have brought law, RBI didn’t apply its mind: dissenting judge

The Government’s demonetisation initiative reflected a concern to address “disparate (economic) evils,” showed “foresight,” and was motivated by the “best intentions and noble objects,” but the way it was done, it violated the law and highlighted how the central bank didn’t apply an independent mind. Because it “arose” from the Centre, the Government should have brought an ordinance or a law in Parliament to implement the noteban rather than get Reserve Bank of India to give a recommendation and issue a notification the way it did.

This is the central argument of the dissenting ruling of Justice B V Nagarathna that, in effect, argues how the Government’s actions undercut the institutional primacy of the RBI.

Disagreeing with the majority view which upheld the demonetisation process, Justice B V Nagarathna held that the measure “was not in accordance with law.” (Read More)

13:59 (IST)03 Jan 2023
Express Opinion | ‘Demonetisation arose from the Centre …it should have enacted a law’

According to sub-section (1) of Section 26 of the Reserve Bank of India Act, 1934, every bank note shall be legal tender at any place in India in payment or on account for the amount expressed therein and shall be guaranteed by the central government. This provision is subject to sub-section (2) of Section 26 of the Act.

Sub-section (2) of Section 26 of the Act applies only when a proposal for demonetisation is initiated by the central board of the bank by way of a recommendation being made to the central government. The said recommendation can be in respect of any series of bank notes of any denomination which is interpreted to mean any specified series of bank notes of any specified denomination.

The expression “any series of bank notes of any denomination” has been given its plain, grammatical meaning, having regard to the context of the provision and not a broad meaning. Thus, the word “any” will mean a specified series or a particular series of bank notes. Similarly, “any” denomination will mean any particular or specified denomination of bank notes. (Read More)

13:56 (IST)03 Jan 2023
Demonetisation decision gets Supreme Court seal of approval

The centre’s decision six years ago to demonetise currency notes of Rs 500 and Rs 1,000 passed the Supreme Court’s test Monday in a majority 4-1 verdict with four judges on a five-judge Constitution Bench holding that the November 8, 2016, notification withdrawing the legal tender of these notes “does not suffer from any flaws in the decision-making process”.

While Justices S Abdul Nazeer, B R Gavai, A S Bopanna and V Ramasubramanian upheld the Government’s move, Justice B V Nagarathna disagreed with the “reasoning and conclusions” in the majority judgment. 

Rejecting arguments against the Government’s decision-making process, Justice Gavai, writing for the Bench, said the court had “scrutinised the entire record, i.e., the communication dated 7th November 2016 addressed by the Secretary, Department of Economic Affairs, Ministry of Finance to the Governor, RBI, the Minutes of the Meeting of the Central Board dated 8th November 2016, the recommendations by the RBI dated 8th November 2016 and the Note for the Cabinet Meeting held on 8th November 2016”. (Read More)

22:32 (IST)02 Jan 2023
Welcome SC judgement on demonetisation: FM Nirmala Sitharaman

Finance Minister Niramala Sitharaman Monday welcomed the Supreme Court judgement upholding the decision of the BJP government at the Centre to demonetise high value currency notes in November 2016.

"Welcome the Hon'ble Supreme Court's judgement today on Demonetization. A five-judge Constitution Bench (via a 4-1 majority) has upheld the Demonetization after carefully examining the issue & has dismissed several petitions challenging the decision," Sitharaman said in a series of tweets.

"There were consultations between the Centre & RBI for a period of 6 months. There is a reasonable nexus to bring such a measure & it satisfies the test of proportionality. Decision-making process cannot be faulted merely because the proposal emanated from the Centre," she said, quoting the judgement. 

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20:37 (IST)02 Jan 2023
Need to highlight minority verdict in SC judgment on demonetisation: CPI

CPI General Secretary D Raja on Monday said citizens should give due consideration to the "dissent judgment" in the Supreme Court's verdict on demonetisation, as it has questioned certain basic issues over the policy decision.

The Parliament was not given the opportunity to discuss the pros and cons of the demonetisation policy when it was announced "surprisingly" and "suddenly" by Prime Minister Narendra Modi back in 2016, he said. "The majority upheld the demonetisation but a dissent has been recorded. The dissent judgment has questioned certain basic issues and our citizens need to give due consideration to the dissent judgment also. Why I am saying this? Parliament is supreme in our democracy," the former Rajya Sabha member said.

"When the demonetisation policy was announced by Prime Minister, surprisingly, suddenly, midnight, Parliament was not consulted. Parliament was not given the opportunity to discuss its pros and cons," the Communist leader added. The government has not said anything in Parliament and it is not ready to place a White Paper explaining everything in Parliament, he said. Demonetisation has proved to be "horrific" for the common people, he added. (PTI)

19:38 (IST)02 Jan 2023
'New rule for Cong: minority SC's view, majority decision not SC ruling': Rijiju; accuses opp party of 'misinforming' people

Law Minister Kiren Rijiju on Monday accused the Congress of attempting to "twist" the issue of demonetisation and "misinform" people after opposition leaders played down the Supreme Court verdict upholding the government's 2016 decision.

In a series of tweets, he also slammed P Chidambaram for projecting the dissenting verdict in the 4:1 majority decision as a "slap on the wrist" of the government. Rijiju asserted that "the Supreme Court never examines the impact of a decision like demonetisation. That question could never have been raised for consideration of the court as it is essentially for the executive."

Chidambaram had claimed that the dissenting verdict on demonetisation is a "slap on the wrist" of the government as it has pointed out the "illegality and irregularities" in the decision.

19:23 (IST)02 Jan 2023
AIMIM chief Owaisi dares BJP to celebrate 'Demonetisation Day'

Hitting out at Prime Minister Narendra Modi over demonetisation, president of AIMIM (All-India Majlis-E-Ittehadul Muslimeen) president Asaduddin Owaisi on Monday challenged the BJP to celebrate 'Demonetisation Day.' He slammed the Modi government over the reason cited for the demonetisation that was decided upon to primarily check flow of black money, among others. He claimed demonetisation affected the economy.

According to Owaisi, the decision (on demonetisation) was wrong as it led to a decline in the growth of the GDP to 4 per cent in 2019-2020 from 8.3 per cent in 2016-17. "We want to tell the Prime Minister why don't you celebrate 'Demonetisation Day'. If demonetisation was a success and if they think it was a success we challenge the BJP why don't they celebrate 'Demonetisation Day'.

The Prime Minister knows that women, daily wage workers, artisans, drivers, electricians, and masons were affected owing to demonetisation. Why doesn't the BJP celebrate 'Notebandi Divas'," the Hyderabad MP said. Quoting a report, Owaisi said 50 lakh people lost employment. (PTI)

17:47 (IST)02 Jan 2023
Pratap Bhanu Mehta writes | Demonetisation verdict: Six years later, farce after tragedy

Demonetisation was a shockingly cruel policy enacted under false pretences. It did not achieve any of its stated objectives: A cashless economy, a revenue bonanza for the government, cleaning the system of illicit money, or stopping terror finance. It inflicted needless suffering and made fools of citizens, who willingly acquiesced.

But the tragedy was followed by an institutional farce. The Supreme Court evaded pronouncing on the legality of the measure for six years. Now it has, as was widely expected, upheld the legality of demonetisation in a 4-to-1 decision. But even farce can sometimes have lasting institutional consequences. In this instance, it will depend on whether we heed the warnings of the dissent. Read the Express Opinion by Pratap Bhanu Mehta 

17:43 (IST)02 Jan 2023
Circulation of fake currency notes continues to pose challenge

Circulation of Fake Indian Currency Notes (FICN) in the country continues to pose a challenge even after the 2016 demonetisation, whose one of the key objectives was to eradicate counterfeiting of notes.

According to report of the National Crime Control Bureau (NCRB), FICN with the face value of Rs 245.33 crore has been seized by the law enforcement agencies across the country since 2016 -- the year the Centre demonetised Rs 1,000 and Rs 500 notes.
The highest amount of FICN with the face value of Rs 92.17 crore was seized in 2020 while the lowest with the face value of Rs 15.92 crore was seized in 2016. In 2021, FICN of Rs 20.39 crore face value was seized in the country, of Rs 34.79 crore in 2019, Rs 26.35 crore in 2018 and Rs 55.71 crore in 2017, the NCRB data showed.

According to the RBI annual report, published in May 2022, the number of fake currency notes of 500 denomination detected by the banking system more than doubled to 79,669 pieces in 2021-22 fiscal over the previous year. (PTI)

17:40 (IST)02 Jan 2023
Wrong to say SC has upheld demonetisation, verdict does not deal with outcomes: Congress

It is "misleading and wrong" to say the Supreme Court has upheld demonetisation, the Congress said on Monday, adding that the majority apex court verdict on the matter deals with the limited issue of the process of decision-making not with its outcomes.

The verdict has nothing to say on whether the stated objectives of demonetisation were met, AICC general secretary Jairam Ramesh said.

"The Supreme Court verdict is on the process of demonetisation and not on its outcomes. If anybody has to apologise, it has to be the Prime Minister, because the 'Tughlaki' decision taken by him on November 8, 2016 destroyed lakhs of MSMEs, the informal sector, and livelihood of lakhs of people, and we continue to face the negative impact it had on our economy," Ramesh said. (PTI)

16:47 (IST)02 Jan 2023
SC did not say demonetisation was right: CPI (M) General Secretary Sitaram Yechury

Communist Party of India (Marxist) General Secretary Sitaram Yechury on Monday reacted to the decision of the Supreme Court's Constitution bench on demonetisation and said that the Court has not declared the decision 'right'.

"The Supreme Court only justified that Central government has the right to take the decision of demonetisation but have not said that demonetisation was right," Sitaram Yechury said.

Speaking to news agency ANI Sitaram, Yechury said, "The Supreme Court has not said that demonetisation was right and a dissenting judge said that the decision taken by the government was to be taken by the Reserve Bank of India (RBI), but here the opposite thing happened and the government sought an opinion from the RBI. If the government had to take a decision on Demonetisation, then it is wrong to bypass the parliament. There was a need to take the opinion of the Parliament and this is the decision of the dissenting judge which is correct. (ANI)

16:43 (IST)02 Jan 2023
Demonetisation: Cong, NCP slam Centre, says 2016 move hit economy, hurt people

The Nationalist Congress Party and the Congress on Monday slammed the Narendra Modi government for demonetisation, their statements coming on a day when the Supreme Court upheld the 2016 move saying the decision did not suffer from any legal or constitutional flaw. The two parties said the Bharatiya Janata Party government at the Centre cannot absolve itself of blame for the distress the people of the country suffered due to the decision to scrap high-value currency notes.

"Despite the (SC) verdict, the BJP government must be held accountable for the downfall of the economy due to demonetisation and the loss of many lives due to the disastrous, ill planned process," NCP national spokesperson Clyde Crasto said. He said the move failed in exposing blast money as 99 per cent of demonetised notes came back to the banks.

"Where did the black money disappear. There is more currency in circulation in the market today than before. So what happened to digital payment if the idea was to minimize cash transactions,'' Crasto questioned. (PTI)

16:16 (IST)02 Jan 2023
Jairam Ramesh calls out SC decision on demonetisation 'misleading' and 'wrong'

Jairam Ramesh, Member of Parliament and General Secretary (Communications) All India Congress Committee, said the Supreme Court's verdict on demonetisation has not specified whether the stated goals of this 'disastrous' decision were met or not.

Ramesh has issued a statement in reaction to the Supreme Court's Monday verdict upholding the decision of the Central government taken in 2016 to demonetise the currency notes of Rs 500 and Rs 1000 denominations.

Ramesh said in his statement, "The Supreme Court has only pronounced on whether Section 26 (2) of RBI Act, 1934 was correctly applied or not before announcing demonetisation on November 8 2016. Nothing more, nothing less. One Hon'ble Judge in her dissenting opinion has said that Parliament should not have been bypassed."  (ANI)

16:01 (IST)02 Jan 2023
SC only looked into legal, technical aspects of demonetisation: Kerala Fin Min

Kerala Finance Minister K N Balagopal on Monday said the Supreme Court verdict upholding the Centre's 2016 decision to demonetise the Rs 1,000 and Rs 500 denomination notes only looked into its legal and technical aspects.

The minister said practically the economic and social impact of the Union government's decision was very serious and detrimental to the growth of various sectors, the minister said.

He said the serious impact that demonetisation had on India's social and economic growth has been proved in the studies by various economists and financial experts. Read more

15:54 (IST)02 Jan 2023
Explained: 5 things Justice B V Nagarathna said in her dissent on SC demonetisation verdict

A Constitution Bench of the Supreme Court has upheld by a 4-1 majority the Centre’s November 8, 2016 decision to withdraw from circulation currency notes of Rs 500 and Rs 1,000 denominations. Justice B V Nagarathna in her dissenting view held that although the government’s demonetisation exercise was well-intentioned and thought-through, it was unlawful on legal grounds.

Read what Justice Nagarathna said in her dissenting judgment

14:47 (IST)02 Jan 2023
Historic judgment in national interest, will Rahul say sorry: BJP after SC's demonetisation verdict

The BJP on Monday hailed the Supreme Court judgment upholding the government's demonetisation exercise as 'historic' and slammed the Congress for its campaign against the decision and asked if its leader Rahul Gandhi will tender an apology after the verdict.

Former law minister and BJP leader Ravi Shankar Prasad asserted that the demonetisation done in 2016 proved to to be the "biggest blow" to terrorism by curbing terror funding. It boosted income tax and cleansed the economy, he claimed. Read more

A worker fixes a board displaying the after-effects of demonetisation and other tax reforms by the central government, prior to a protest by the Congress party at Azad Maidan in Mumbai. (Express file photo by Nirmal Harindran)

Note ban decision was deeply flawed: Chidambaram in Supreme Court

Senior Advocate P Chidambaram on Thursday termed the decision-making process leading to the Centre’s 2016 move to demonetise currency notes of Rs 500 and Rs 1,000 as “deeply flawed”. He told a five-judge Constitution bench of the Supreme Court, presided by Justice S Abdul Nazeer, which is hearing a clutch of petitions challenging demonetisation, that the process could have started only from the RBI.

Chidambaram referred to the Preamble of the Reserve Bank of India Act, 1934, which said the right to regulate the issue of banknotes is entirely with RBI. It also generally operates the currency and the credit system. “That is why anything to do with currency must have emanated from the Reserve Bank of India,” he argued. He said the government could have exercised the power to demonetise only on RBI’s recommendation.

Noting that the demonetisation action should not be seen as a standalone measure, the Centre said it was “one of the critical steps in the series of transformational economic policy steps” and “a major step to fight the menace of fake currency notes, storage of uncounted wealth and financing of subversive activities”. (File)

Began talks with RBI eight months before demonetisation: Govt to Supreme Court

The Centre has told the Supreme Court it began consultations with the Reserve Bank of India in February 2016 — at least eight months before notifying demonetisation i.e., withdrawal of legal tender character of Rs 500 and Rs 1,000 notes, on November 8, 2016.

“It was taken after extensive consultation with the RBI and advance preparation… The then Finance Minister had stated in the Parliament… that Government consultation with RBI began in February 2016; however, the process of the consultation and the decision-making were kept confidential,” it said in an affidavit.

People form a long queue outside an ATM in Bank Square, Sector 17 of Chandigarh, to withdraw money on December 10, 2016, a month after Indian government announced the demonetisation of banknotes of Rs 500 and Rs 1,000. (Express Photo by Kamleshwar Singh)

Six years after demonetisation: A look at what happened and changed

Six years ago, on this day, November 8, the Government of India announced the demonetisation of all banknotes of Rs 500 and Rs 1,000, as a step against accumulation and circulation of domestic black money.

Prime Minister Narendra Modi, in his televised address to the nation on November 8, 2016, said that the two banknotes will be “just worthless piece of paper,” with immediate effect, and went on to introduce new notes of Rs 2,000 and Rs 500 for public circulation.

While many have pegged it as a “bold” move, the Opposition, over the years, has criticised the BJP government, calling the decision a “failure”.

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First published on: 02-01-2023 at 09:37 IST
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